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Casino bill may cost schools over $100 million over 2 years: study

A proposed Waukegan City Council committee gaming could be formed next month augment effort lure casino license out General Assembly

A proposed Waukegan City Council committee on gaming could be formed next month to augment the effort to lure a casino license out of the General Assembly in 2012. | Sun-Times Media file

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Updated: November 15, 2011 12:28PM

SPRINGFIELD — Stalled legislation authorizing a Chicago casino could wind up costing Illinois schools more than $100 million over a two-year period, according to an analysis by state revenue officials.

That’s because of a tax break written into the legislation at Mayor Rahm Emanuel’s request that assigns the highest-grossing casinos a tax rate as little as 20 percent on revenues above $350 million. Existing law taxes such windfalls at a 50-percent rate.

New number crunching by the Illinois Department of Revenue follows the governor’s argument earlier this month that the casino-tax provision is “regressive” and that it “shortchanges” Illinois schoolchildren.

“I think it’s very important our state invest the maximum it can in education from birth on, so anything that would jeopardize that, I think, is suspect. We don’t want casino operators to make a lot of money for themselves but shortchange children through proper contributions to the school assistance fund. That’s where I’m coming from,” said Quinn, who has not been willing to say publicly whether he’d veto or rewrite the gambling bill.

The provision sought by Emanuel’s administration during the spring legislative session’s final weeks was designed to help recoup start-up costs for a casino, which is expected to gross $600 million annually, and to pay for infrastructure needs across the city.

“The state of Illinois, which includes the city of Chicago, will benefit from the casino legislation,” Emanuel spokeswoman Chris Mather said when asked about the new calculations from the Quinn administration. “Billions of dollars will go to the state; and, in Chicago, 100 percent of the casino’s proceeds will go to repair the city’s aging infrastructure and benefit the city’s taxpayers.”

The Department of Revenue analysis of the legislation calculated that $123 million less would funnel into state coffers as a result of the lower tax rate on a Chicago casino.

Ordinarily, about 86 percent of casino revenues — in the case of a Chicago casino, nearly $105 million — goes to schools in the city, suburbs and downstate. The remainder gets split between the Illinois Gaming Board, the horseracing industry and human services.

The new analysis further noted that no other state has a declining tax rate for high-grossing casinos as Illinois would under the legislation approved by state lawmakers.

State Rep. Lou Lang (D-Skokie), the lead House sponsor of the bill, denied schoolchildren would be hurt by his legislation and said the Quinn administration estimates amounted to a “red herring.”

“This sounds like a series of numbers put together to prove a point,” Lang told the Sun-Times. “I wouldn’t be for a bill of any kind if I thought it would shortchange education.”

Lang expressed a willingness to negotiate the tax-rate changes with Quinn and even include a “hold-harmless” provision for schools in follow-up legislation if it would persuade the governor to sign the bill. Unclear of Quinn’s intentions, Senate President John Cullerton (D-Chicago) still has not forwarded the legislation to the governor.

“If someone said, ‘Leave that tax structure in place until they recoup their costs,’” Lang said, referring to the city, “ ‘then revert back to a different structure,’ I could live with that.”

Lang said schools statewide would stand to gain from the $1 billion-plus windfall in revenues generated from new casinos in Chicago, north suburban Park City, the south suburbs, Rockford and Danville; slot machines at racetracks; and added gambling positions at existing casinos.

“If there’s $1 billion in new money on the table that isn’t earmarked, we should earmark more for education. If we have to hold education harmless, it’s easy to put in the trailer bill,” he said. “It’s a stretch to say education won’t get this money. Education will get this money if we decide education gets that money.”

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